Empirical Analysis of Credit Risk Regime Switching and Temporal Conditional Default Correlation in Credit Default Swap Valuation: The Market liquidity effect

In this paper, we extend the debate concerning Credit Default Swap valuation to include time varying correlation and co-variances. Traditional multi-variate techniques treat the correlations between covariates as constant over time; however, this view is not supported by the data. Secondly, since financial data does not follow a normal distribution because of its heavy tails, modeling the data using a Generalized Linear model (GLM) incorporating copulas emerge as a more robust technique over traditional approaches. This paper also includes an empirical analysis of the regime switching dynamics of credit risk in the presence of liquidity by following the general practice of assuming that credit and market risk follow a Markov process. The study was based on Credit Default Swap data obtained from Bloomberg that spanned the period January 1st 2004 to August 08th 2006. The empirical examination of the regime switching tendencies provided quantitative support to the anecdotal view that liquidity decreases as credit quality deteriorates. The analysis also examined the joint probability distribution of the credit risk determinants across credit quality through the use of a copula function which disaggregates the behavior embedded in the marginal gamma distributions, so as to isolate the level of dependence which is captured in the copula function. The results suggest that the time varying joint correlation matrix performed far superior as compared to the constant correlation matrix; the centerpiece of linear regression models.

Progress report on the development of a large-scale conditional consistent economic and manpower forecasting model /

Bibliography: p. 27.

High Diagnostic Accuracy And Reproducibility Of Fine-needle Aspiration Cytology For Diagnosing Salivary Gland Tumors: Cytohistologic Correlation In 182 Cases.

The purpose of this study was to assess the efficacy and reproducibility of the cytologic diagnosis of salivary gland tumors (SGTs) using fine-needle aspiration cytology (FNAC). The study aimed to determine diagnostic accuracy, sensitivity, and specificity and to evaluate the extent of interobserver agreement. We retrospectively evaluated SGTs from the files of the Division of Pathology at the Clinics Hospital of São Paulo and Piracicaba Dental School between 2000 and 2006. We performed cytohistologic correlation in 182 SGTs. The sensitivity, specificity, positive predictive value, negative predictive value, and diagnostic accuracy were 94%, 100%, 100%, 100%, and 99%, respectively. The interobserver cytologic reproducibility showed significant statistical concordance (P < .0001). FNAC is an effective tool for performing a reliable preoperative diagnosis in SGTs and shows high diagnostic accuracy and consistent interobserver reproducibility. Further FNAC studies analyzing large samples of malignant SGTs and reactive salivary lesions are needed to confirm their accuracy.

Correlation between carbon isotope discrimination and transpiration efficiency in lines of the C-4 species Sorghum bicolor in the glasshouse and the field

Transpiration efficiency, W, the ratio of plant carbon produced to water transpired and carbon isotope discrimination of leaf dry matter, Delta(d)' were measured together on 30 lines of the C-4 species, Sorghum bicolor in the glasshouse and on eight lines grown in the field. In the glasshouse, the mean W observed was 4.9 mmol C mol(-1) H2O and the range was 0.8 mmol C mol(-1) H2O The mean Delta(d) was 3.0 parts per thousand and the observed range was 0.4 parts per thousand. In the field, the mean W was lower at 2.8 mmol C mol H2O and the mean Delta(d) was 4.6 parts per thousand. Significant positive correlations between W and Delta(d) were observed for plants grown in the glasshouse and in the field. The observed correlations were consistent with theory, opposite to those for C-4 species, and showed that variation in Delta(d) was an integrated measure of long-term variation in the ratio of intercellular to ambient CO2 partial pressure, p(i)/p(a). Detailed gas exchange measurements of carbon isotope discrimination during CO2 uptake, Delta(A) and p(i)/p(a) were made on leaves of eight S. bicolor lines. The observed relationship between Delta(A) and p(i)/p(a) was linear with a negative slope of 3.7 parts per thousand in Delta(A) for a unit change in p(i)/p(a). The slope of this linear relationship between Delta(A) and p(i)/p(a) in C-4 species is dependent on the leakiness of the CO2 concentrating mechanism of the C pathway, We estimated the leakiness (defined as the fraction of CO2 released in the bundle sheath by C-4 acid decarboxylations, which is lost by leakage) to be 0.2. We conclude that, although variation in Delta(d) observed in the 30 lines of S. bicolor is smaller than that commonly observed in C-4 species, it also reflects variation in transpiration efficiency, W. Among the eight lines examined in detail and in the environments used, there was considerable genotype x environment interaction.

Conditional probability applied to the definition of limestone geochemical facies: A new Methodological Approach

A new method, based on linear correlation and phase diagrams was successfully developed for processes like the sedimentary process, where the deposition phase can have different time duration - represented by repeated values in a series - and where the erosion can play an important rule deleting values of a series. The sampling process itself can be the cause of repeated values - large strata twice sampled - or deleted values: tiny strata fitted between two consecutive samples. What we developed was a mathematical procedure which, based upon the depth chemical composition evolution, allows the establishment of frontiers as well as the periodicity of different sedimentary environments. The basic tool isn't more than a linear correlation analysis which allow us to detect the existence of eventual evolution rules, connected with cyclical phenomena within time series (considering the space assimilated to time), with the final objective of prevision. A very interesting discovery was the phenomenon of repeated sliding windows that represent quasi-cycles of a series of quasi-periods. An accurate forecast can be obtained if we are inside a quasi-cycle (it is possible to predict the other elements of the cycle with the probability related with the number of repeated and deleted points). We deal with an innovator methodology, reason why it's efficiency is being tested in some case studies, with remarkable results that shows it's efficacy. Keywords: sedimentary environments, sequence stratigraphy, data analysis, time-series, conditional probability.

Dynamics of Epileptic Activity in a Peculiar Case of Childhood Absence Epilepsy and Correlation with Thalamic Levels of GABA

Childhood absence epilepsy (CAE) is a syndrome with well-defined electroclinical features but unknown pathological basis. An increased thalamic tonic GABA inhibition has recently been discovered on animal models (Cope et al., 2009), but its relevance for human CAE is unproven. METHODS: We studied an 11-year-old boy, presenting the typical clinical features of CAE, but spike-wave discharges (SWD) restricted to one hemisphere. RESULTS: High-resolution EEG failed to demonstrate independent contralateral hemisphere epileptic activity. Consistently, simultaneous EEG-fMRI revealed the typical thalamic BOLD activation, associated with caudate and default mode network deactivation, but restricted to the hemisphere with SWD. Cortical BOLD activations were localized on the ipsilateral pars transverse. Magnetic resonance spectroscopy, using MEGA-PRESS, showed that the GABA/creatine ratio was 2.6 times higher in the hemisphere with SWD than in the unaffected one, reflecting a higher GABA concentration. Similar comparisons for the patient's occipital cortex and thalamus of a healthy volunteer yielded asymmetries below 25%. SIGNIFICANCE: In a clinical case of CAE with EEG and fMRI-BOLD manifestations restricted to one hemisphere, we found an associated increase in thalamic GABA concentration consistent with a role for this abnormality in human CAE.

Measurement of the correlation between flow harmonics of different order in lead-lead collisions at root S-NN=2.76 TeV with the ATLAS detector

Correlations between the elliptic or triangular flow coefficients vm (m=2 or 3) and other flow harmonics vn (n=2 to 5) are measured using sNN−−−−√=2.76 TeV Pb+Pb collision data collected in 2010 by the ATLAS experiment at the LHC, corresponding to an integrated lumonisity of 7 μb−1. The vm-vn correlations are measured in midrapidity as a function of centrality, and, for events within the same centrality interval, as a function of event ellipticity or triangularity defined in a forward rapidity region. For events within the same centrality interval, v3 is found to be anticorrelated with v2 and this anticorrelation is consistent with similar anticorrelations between the corresponding eccentricities ϵ2 and ϵ3. On the other hand, it is observed that v4 increases strongly with v2, and v5 increases strongly with both v2 and v3. The trend and strength of the vm-vn correlations for n=4 and 5 are found to disagree with ϵm-ϵn correlations predicted by initial-geometry models. Instead, these correlations are found to be consistent with the combined effects of a linear contribution to vn and a nonlinear term that is a function of v22 or of v2v3, as predicted by hydrodynamic models. A simple two-component fit is used to separate these two contributions. The extracted linear and nonlinear contributions to v4 and v5 are found to be consistent with previously measured event-plane correlations.

A Consistent Nonparametric Bootstrap Test of Exogeneity

This paper proposes a novel way of testing exogeneity of an explanatory variable without any parametric assumptions in the presence of a "conditional" instrumental variable. A testable implication is derived that if an explanatory variable is endogenous, the conditional distribution of the outcome given the endogenous variable is not independent of its instrumental variable(s). The test rejects the null hypothesis with probability one if the explanatory variable is endogenous and it detects alternatives converging to the null at a rate n..1=2:We propose a consistent nonparametric bootstrap test to implement this testable implication. We show that the proposed bootstrap test can be asymptotically justi.ed in the sense that it produces asymptotically correct size under the null of exogeneity, and it has unit power asymptotically. Our nonparametric test can be applied to the cases in which the outcome is generated by an additively non-separable structural relation or in which the outcome is discrete, which has not been studied in the literature.

Estimation of the lateral correlation structure of subsurface water content from surface-based ground-penetrating radar reflection images

Over the past decade, significant interest has been expressed in relating the spatial statistics of surface-based reflection ground-penetrating radar (GPR) data to those of the imaged subsurface volume. A primary motivation for this work is that changes in the radar wave velocity, which largely control the character of the observed data, are expected to be related to corresponding changes in subsurface water content. Although previous work has indeed indicated that the spatial statistics of GPR images are linked to those of the water content distribution of the probed region, a viable method for quantitatively analyzing the GPR data and solving the corresponding inverse problem has not yet been presented. Here we address this issue by first deriving a relationship between the 2-D autocorrelation of a water content distribution and that of the corresponding GPR reflection image. We then show how a Bayesian inversion strategy based on Markov chain Monte Carlo sampling can be used to estimate the posterior distribution of subsurface correlation model parameters that are consistent with the GPR data. Our results indicate that if the underlying assumptions are valid and we possess adequate prior knowledge regarding the water content distribution, in particular its vertical variability, this methodology allows not only for the reliable recovery of lateral correlation model parameters but also for estimates of parameter uncertainties. In the case where prior knowledge regarding the vertical variability of water content is not available, the results show that the methodology still reliably recovers the aspect ratio of the heterogeneity.

Evolution of the correlation between expression divergence and protein divergence in mammals.

Divergence of protein sequences and gene expression patterns are two fundamental mechanisms that generate organismal diversity. Here, we have used genome and transcriptome data from eight mammals and one bird to study the positive correlation of these two processes throughout mammalian evolution. We demonstrate that the correlation is stable over time and most pronounced in neural tissues, which indicates that it is the result of strong negative selection. The correlation is not driven by genes with specific functions and may instead best be viewed as an evolutionary default state, which can nevertheless be evaded by certain gene types. In particular, genes with developmental and neural functions are skewed toward changes in gene expression, consistent with selection against pleiotropic effects associated with changes in protein sequences. Surprisingly, we find that the correlation between expression divergence and protein divergence is not explained by between-gene variation in expression level, tissue specificity, protein connectivity, or other investigated gene characteristics, suggesting that it arises independently of these gene traits. The selective constraints on protein sequences and gene expression patterns also fluctuate in a coordinate manner across phylogenetic branches: We find that gene-specific changes in the rate of protein evolution in a specific mammalian lineage tend to be accompanied by similar changes in the rate of expression evolution. Taken together, our findings highlight many new aspects of the correlation between protein divergence and expression divergence, and attest to its role as a fundamental property of mammalian genome evolution.

Monitoring multiple angiogenesis-related molecules in the blood of cancer patients shows a correlation between VEGF-A and MMP-9 levels before treatment and divergent changes after surgical vs. conservative therapy.

Anti-angiogenic therapies are currently in cancer clinical trials, but to date there are no established tests for evaluating the angiogenic status of a patient. We measured 11 circulating angiogenesis-associated molecules in cancer patients before and after local treatment. The purpose of our study was to screen for possible relationships among the different molecules and between individual molecules and tumor burden. We measured VEGF-A, PlGF, SCF, MMP-9, EDB+ -fibronectin, sVEGFR-2, sVEGFR-1, salphaVbeta3, sTie-2, IL-8 and CRP in the blood of 22 healthy volunteers, 17 early breast, 17 early colorectal, and 8 advanced sarcoma/melanoma cancer patients. Breast cancer patients had elevated levels of VEGF-A and sTie-2, colorectal cancer patients of VEGF-A, MMP-9, sTie-2, IL-8 and CRP, and melanoma/sarcoma patients of sVEGFR-1. salphaVbeta3 was decreased in colorectal cancer patients. A correlation between VEGF-A and MMP-9 was found. After tumor removal, MMP-9 and salphaVbeta3 significantly decreased in breast and CRP in colorectal cancer, whereas sVEGFR-1 increased in colorectal cancer patients. In sarcoma/melanoma patients treated regionally with TNF and chemotherapy we observed a rise in VEGF-A, SCF, VEGFR-2, MMP-9, Tie-2 and CRP, a correlation between CRP and IL-8, and a decreased in sVEGFR-1 levels. In conclusion, among all factors measured, only VEGF-A and MMP-9 consistently correlated to each other, elevated CRP levels were associated with tumor burden, whereas sVEGF-R1 increased after tumor removal in colorectal cancer. Treatment with chemotherapy and TNF induced changes consistent with an angiogenic switch. These results warrant a prospective study to compare the effect of surgical tumor removal vs. chemotherapy on some of these markers and to evaluate their prognostic/predictive value.

Schizophrenia connectivity: correlation between cognitive deficits and reduced thalamo-cortical fibers

Introduction: Schizophrenia is associated with multiple neuropsychological dysfunctions, such as disturbances of attention, memory, perceptual functioning, concept formation and executive processes. These cognitive functions are reported to depend on the integrity of the prefrontal and thalamo-prefrontal circuits. Multiple lines of evidence suggest that schizophrenia is related to abnormalities in neural circuitry and impaired structural connectivity. Here, we report a preliminary case-control study that showed a correlation between thalamo-frontal connections and several cognitive functions known to be impaired in schizophrenia. Materials and Methods: We investigated 9 schizophrenic patients (DSM IV criteria, Diagnostic Interview for Genetic Studies) and 9 age and sex matched control subjects. We obtained from each volunteer a DT-MRI dataset (3 T, _ _ 1,000 s/mm2), and a high resolution anatomic T1. The thalamo- frontal tracts are simulated with DTI tractography on these dataset, a method allowing inference of the main neural fiber tracks from Diffusion MRI data. In order to see an eventual correlation with the thalamo-frontal connections, every subject performs a battery of neuropsychological tests including computerized tests of attention (sustained attention, selective attention and reaction time), working memory tests (Plane test and the working memory sub-tests of the Wechsler Adult Intelligence Scale), a executive functioning task (Tower of Hanoï) and a test of visual binding abilities. Results: In a pilot case-control study (patients: n _ 9; controls: n _ 9), we showed that this methodology is appropriate and giving results in the excepted range. Considering the relation of the connectivity density and the neuropsychological data, a correlation between the number of thalamo- frontal fibers and the performance in the Tower of Hanoï was observed in the patients (Pearson correlation, r _ 0.76, p _ 0.05) but not in control subjects. In the most difficult item of the test, the least number of fibers corresponds to the worst performance of the test (fig. 2, number of supplementary movements of the elements necessary to realize the right configuration). It's interesting to note here that in an independent study, we showed that schizophrenia patients (n _ 32) perform in the most difficult item of the Tower of Hanoï (Mann-Whitney, p _ 0.005) significantly worse than control subjects (n _ 29). This has been observed in several others neuropsychological studies. Discussion: This pilot study of schizophrenia patients shows a correlation between the number of thalam-frontal fibers and the performance in the Tower of Hanoï, which is a planning and goal oriented actions task known to be associated with frontal dysfonction. This observation is consistent with the proposed impaired connectivity in schizophrenia. We aim to pursue the study with a larger sample in order to determine if other neuropsychological tests may be associated with the connectivity density.

Ground-state self-consistent calculation of quantum dots under magnetic fields: Addition spectrum

A density-functional self-consistent calculation of the ground-state electronic density of quantum dots under an arbitrary magnetic field is performed. We consider a parabolic lateral confining potential. The addition energy, E(N+1)-E(N), where N is the number of electrons, is compared with experimental data and the different contributions to the energy are analyzed. The Hamiltonian is modeled by a density functional, which includes the exchange and correlation interactions and the local formation of Landau levels for different equilibrium spin populations. We obtain an analytical expression for the critical density under which spontaneous polarization, induced by the exchange interaction, takes place.

Essays in equilibrium asset pricing

Introduction This dissertation consists of three essays in equilibrium asset pricing. The first chapter studies the asset pricing implications of a general equilibrium model in which real investment is reversible at a cost. Firms face higher costs in contracting than in expanding their capital stock and decide to invest when their productive capital is scarce relative to the overall capital of the economy. Positive shocks to the capital of the firm increase the size of the firm and reduce the value of growth options. As a result, the firm is burdened with more unproductive capital and its value lowers with respect to the accumulated capital. The optimal consumption policy alters the optimal allocation of resources and affects firm's value, generating mean-reverting dynamics for the M/B ratios. The model (1) captures convergence of price-to-book ratios -negative for growth stocks and positive for value stocks - (firm migration), (2) generates deviations from the classic CAPM in line with the cross-sectional variation in expected stock returns and (3) generates a non-monotone relationship between Tobin's q and conditional volatility consistent with the empirical evidence. The second chapter proposes a standard portfolio-choice problem with transaction costs and mean reversion in expected returns. In the presence of transactions costs, no matter how small, arbitrage activity does not necessarily render equal all riskless rates of return. When two such rates follow stochastic processes, it is not optimal immediately to arbitrage out any discrepancy that arises between them. The reason is that immediate arbitrage would induce a definite expenditure of transactions costs whereas, without arbitrage intervention, there exists some, perhaps sufficient, probability that these two interest rates will come back together without any costs having been incurred. Hence, one can surmise that at equilibrium the financial market will permit the coexistence of two riskless rates that are not equal to each other. For analogous reasons, randomly fluctuating expected rates of return on risky assets will be allowed to differ even after correction for risk, leading to important violations of the Capital Asset Pricing Model. The combination of randomness in expected rates of return and proportional transactions costs is a serious blow to existing frictionless pricing models. Finally, in the last chapter I propose a two-countries two-goods general equilibrium economy with uncertainty about the fundamentals' growth rates to study the joint behavior of equity volatilities and correlation at the business cycle frequency. I assume that dividend growth rates jump from one state to other, while countries' switches are possibly correlated. The model is solved in closed-form and the analytical expressions for stock prices are reported. When calibrated to the empirical data of United States and United Kingdom, the results show that, given the existing degree of synchronization across these business cycles, the model captures quite well the historical patterns of stock return volatilities. Moreover, I can explain the time behavior of the correlation, but exclusively under the assumption of a global business cycle.

Quantitative integration of high-resolution hydrogeophysical data through Monte-Carlo-type conditional simulations

Geophysical techniques can help to bridge the inherent gap with regard to spatial resolution and the range of coverage that plagues classical hydrological methods. This has lead to the emergence of the new and rapidly growing field of hydrogeophysics. Given the differing sensitivities of various geophysical techniques to hydrologically relevant parameters and their inherent trade-off between resolution and range the fundamental usefulness of multi-method hydrogeophysical surveys for reducing uncertainties in data analysis and interpretation is widely accepted. A major challenge arising from such endeavors is the quantitative integration of the resulting vast and diverse database in order to obtain a unified model of the probed subsurface region that is internally consistent with all available data. To address this problem, we have developed a strategy towards hydrogeophysical data integration based on Monte-Carlo-type conditional stochastic simulation that we consider to be particularly suitable for local-scale studies characterized by high-resolution and high-quality datasets. Monte-Carlo-based optimization techniques are flexible and versatile, allow for accounting for a wide variety of data and constraints of differing resolution and hardness and thus have the potential of providing, in a geostatistical sense, highly detailed and realistic models of the pertinent target parameter distributions. Compared to more conventional approaches of this kind, our approach provides significant advancements in the way that the larger-scale deterministic information resolved by the hydrogeophysical data can be accounted for, which represents an inherently problematic, and as of yet unresolved, aspect of Monte-Carlo-type conditional simulation techniques. We present the results of applying our algorithm to the integration of porosity log and tomographic crosshole georadar data to generate stochastic realizations of the local-scale porosity structure. Our procedure is first tested on pertinent synthetic data and then applied to corresponding field data collected at the Boise Hydrogeophysical Research Site near Boise, Idaho, USA.